The Group reported a net profit of RM3.2m for 3QFY21, turning around from the RM3.4m loss in the immediate preceding quarter. This was very much helped by fair value gains however, though there are some nascent signs of encouragement for the coming financial year. Cumulative 9MFY21 net loss of RM4.8m is below expectations, with the movement restrictions re-imposed in the months under review weighing heavily. We cut FY21 estimates by 63% to reflect the current challenges, though we still expect the Group to remain profitable this financial year on expectation of stronger recovery in its leisure segment this year-end. We continue to like I-Berhad’s long-term value proposition underpinned by a remaining ~60% of its gross development value yet to be realized, though we retain our Neutral call in the absence of near term re-rating catalysts Our target price is unchanged at RM0.26 (based on a steep 80% discount to fully-diluted RNAV).

• 3QFY21 earnings overview. The property development segment remained profitable in the current quarter with a pretax profit of RM6.4m recorded (2QFY21: +RM2.2m) as the Group continued to recognize earnings from construction progress of its Hill10 project, while also recognizing sales of its latest development, Be Central. We understand keys are already being handed over to Hill10 purchasers, which should see billings rise in 4Q, though possibly lowering unbilled sales which is currently at RM32.9m as at end-Sept (June 2021: RM48.6m). The property investment segment reported a pretax profit of RM1.0m due in large part to a fair value gain from development cost savings for the corporate office tower, which would have otherwise been weighed by losses at the mall due to the lockdown imposed during the quarter. The Group’s leisure segment was not spared the latter, sinking to a pretax loss of RM2.0m.

• Business overview. The Group will continue to work on reducing its inventory levels which currently stand at RM811.5m, of which about RM500m is its 8KiaPeng project in downtown Kuala Lumpur. On a positive note, it has been reported that the Maybank Group will be taking up 14 floors at its Grade-A corporate office in Shah Alam, consequently bringing up occupancy rate to 80%. Its BeCentral serviced apartment tower which has yet to be officially launched continues to see sales recognized in its books meanwhile. With the completion and gradual handover of the Hill10 Residences, the DoubleTree by Hilton is also now slated to open its doors mid-2022, all pointing toward a more meaningful FY22 for the Group.

Source: PublicInvest Research - 25 Nov 2021